The critical difference between Governance and Management when you are on a board

January 27, 2021

This question comes up a lot when teaching wannabe directors. And it comes up with employees who are under the mistaken belief that their board actually manages the company. So let me demystify it now. We don’t manage. At all.

The critical difference is that the board is in place to provide oversight, not to make decisions. Oversight to ensure shareholders are well served. Oversight to ensure the law is followed. That, over time, the decisions the leadership team makes are good ones. Oversight to ensure the company is not damaged by a series of bad decisions. But none of these are the same thing as making decisions.

The CEO and his/her team’s responsibility is to make decisions that move the company forward. And they are the only people that can. They are the people closest to reality with real data about what’s happening on the ground. The board is simply not close enough to the day-to-day to make operating decisions.

Now it’s not so black and white that the board makes no decisions at all. But there are very few such as:

hiring (or firing) the CEO – this is always a hard one and usually takes boards too long to realize they have the wrong CEO and yet it is the most important decision a board ever makes.
the makeup of the board itself, and the committee structure – yet another decision that in the past boards did not spend enough time on and cronyism prevailed but now, with the emphasis on diversity at the board level, is finally getting enough attention.
CEO and pay structure – how much is cash, time based or performance based and is it passing the say-on-pay tests with ISS?
major financing or M&A events – clearly big decisions that the board must weigh in on, although in the end it is the conviction of the CEO that must carry the day.
response to activists – and this is one place where the board must actively engage, understand the activists position and determine how and whether to respond.

But even all these types, and similar, decisions are made through a process of discussion, consensus and then a vote rather than one person making a decision.

Otherwise, the boards job is to provide oversight and the most effective way to do that is to learn the art of questioning. This can be hard if you have been a CEO or an executive and you are used to making decisions and leading. It can take time to learn how to sit quietly listening, and then think about what question can you ask that will either improve your understanding or help the CEO make a better decision. You’re not paid to talk on a board. You’re paid to be thinking, deliberating and advising. Often less is more.

I heard a great question last week from a panelist on just this issue of how to learn how to question. We were discussing how to help a leadership team review their strategy which can sometimes be contentious because teams do get wedded to their strategies. And yet, you want to help them think through where they may be missing something, or making a mistake. The question this panelist suggested was “What would have to be true for you to be wrong?”. A great question which requires serious thinking about what assumptions the CEO may have that may not be true in the future, but without challenging that the strategy itself is wrong. And the oversight comes as you watch the leadership team respond to the questions, and make their final decisions. You judge on the quality of the decisions over time.

So next time you look at a board and think they are powerful think again. They are, but in a very narrow and yet important way for the health of the company and its shareholders.

Boards

How boards must change

June 16, 2020

“The full weight of responsibility for change rests with those who control the institutions” – White Fragility:Why it’s so hard for white people to talk about Racism by Robin DiAngelo

Our institutions in the US are led predominantly by men. Women would simply not have the rights we cherish today, such as the right to vote, if the majority of men in power had not supported them.

Companies have been paying attention to gender diversity among employees for some years now. It’s been talked about at length but it was not until California mandated that boards include women, and major investors like Blackrock began to use their weight to require female directors, that many companies have moved quickly to bring one, or more than one, woman onto the board. Finally, when faced with a potential fine or a “no” vote from a major shareholder, boards listen. European boards would not be 40% female unless it was the law. Setting, and meeting, serious targets works to bring about change.

But our institutions are also led by people who are predominantly White, or if you are in technology, White or Asian. Which means we, the leaders, carry the responsibility to create the change needed to make our workforces, our leadership teams and our boards racially diverse. It’s both the right thing to do, and we now know diversity creates better decisions and better results so there is no business reason to object.

As Omar Johnson says in his compelling Open Letter to White corporate America “Inside your company walls, you need to hire more Black people. Period.”

I am horrified by the recent murders in the Black community. The human and social cost of systemic racism in the US is sickening. I am humbled by my ignorance and committed to getting better educated and taking action. I must do better. Our companies must do better.

The way I, and my fellow directors, can effect change is to be committed, supported by action, to helping our companies become truly diverse at all levels. Racially diverse and gender diverse. It will take time but boards and governance committees are responsible for reviewing our ESG programs–Environment, Social and Governance–and to show progress. This was a growing area of focus which is now in the bright spotlight of current news. Several large institutional investors had started to demand diversity at the board and executive levels, which will add fuel to drive change.

As directors we must ask the questions and require the metrics which will drive meaningful, ongoing improvement to racial diversity in our companies. It’s past time.

Career Advice

Management screws up – what do you do?

May 1, 2018

Something is wrong and management has messed up again, how do you react?

One of the ways people react and hurt themselves in the process is by being immediately negative. Cynically: “well this is just the norm for this effed-up company” or “yet again we are going to screw our customers”. Maybe with resignation: “I’ll have to work more hours now to correct their mistakes”. Maybe as a victim: “I have no power and I can’t take the risk of saying anything”. Maybe on the attack: “We need to get rid of our VP”. You’ve heard them all I am sure, standing around the water cooler discussing how, yet again, management is no good.

How is that helpful to anyone? It’s only helpful to you for 30 seconds as you feel better venting (but it’s better to save that for your dog). It’s not helpful to your team mates because while they might pile on for a moment they will be left feeling worse.

But most of all it is not helpful to your management. When there is a problem usually everyone knows it, including management who, though they may not show it, are probably worrying too. Quality issues, high turnover, bad process – it’s probably a known issue that is languishing or not being solved for whatever reason. Or maybe you’ve identified a problem. Either way piling on to complain or roll your eyes does not contribute to the solution.

What most leaders long for is for the people on their team to describe the problem constructively and offer solutions. Pragmatic or harebrained, cheap or expensive, start the conversation and you become part of the solution.

If you are not sure how to do this maybe role-play with a friend. Practice describing what you see without being negative, cynical or frustrated. Don’t be a Pollyanna either. Focus on facts, process, unconscious culture – whatever is contributing but in a pragmatic tone. Make sure you are clear up front that your objective is to bring a new idea or solution so you don’t get derailed in the description of the problem before your audience knows your intent (so he can keep listening and not stop listening and start composing his response in his head before you get to your idea). For example, first sentence “I have been thinking about the quality issue on the latest release and I have an idea” or “I’m concerned about the turnover in our department and I have an idea as to how we could reduce it”.

There is a mind game you can play with yourself. Imagine you are the CEO listening to you. You are busy and burdened with the challenges of the job. You (the CEO you) may know the problem you (the employee you) is about to bring up, you may not. Either way, what is the best way to quickly describe the problem/your observation and your idea? Practice that – without being negative or sycophantic.

If you get skilled at this you will become part of the solution and you will be recognized and appreciated by your management. It will create opportunity for you. Early in my career I was not as skilled at this as I wish I could have been, but I was good at pointing out the problems and offering to fix them. Taking on broken programs, developing new programs from scratch to solve a problem or develop an untapped opportunity and this definitely accelerated my career.

Now you may say this would not work in your company. That’s not the culture. Management doesn’t want to hear, HR doesn’t listen etc. etc. To that I say get out. Find a better company that is worthy of your talent. And when you do, chalk it up to experience, or if you think it’s really egregious maybe write a blog like Susan Fowler did and bring down leadership. You are never powerless.

Leadership

Winning as a CEO takes courage – does your CEO have it?

April 24, 2018

It takes courage to be a great CEO and yet our world is populated with mediocre ones so how do you assess a company CEO before you chose to join his company, or whether you have the mettle to be one yourself?

The evidence is there if you know where to look. It’s not just about a CEO who can give a rallying speech (although it’s fun to watch a CEO like Marc Benioff do it). It’s not just about a brilliant technical founder CEO who can talk product and vision. Once the company is off the ground courage is needed for the big moves that set the future, and because they are big moves they are inherently risky.

Take a look at your company, or the company you are thinking of joining, and look for the signs of courage in the CEO. For example:

Buying a large company, spending a billion dollars or more takes real guts. It has to be for strategic reasons, product reasons, and make sense to the shareholder. But no matter how compelling the strategic and financial argument the CEO knows so many things can go wrong during or after the transaction and in the end it is the CEO who will take the blame if they do. The board will question (that’s their job) and weak boards won’t want to take the risk – it’s easier to do nothing. So they will look to the CEO for the final courage to make the move. I do, however, think M&A of small companies doesn’t take much courage. “Tuck-ins” as corp dev teams like to call them can be justified on financial terms and, unless you greatly over pay, don’t incur much risk. But the big ones take courage and conviction.

Changing the business model – for example moving software to the cloud. The courageous CEO takes a stand and makes it happen. He tells the shareholders what he’s doing and how many quarters it is going to take and then he leads the organization to make the change happen fast. Transitioning a software business from a perpetual, on-premise licensing model to a subscription model in the cloud is really hard because it always causes the stock to drop in the near term (although it will recover and be stronger if you execute). There are always a thousand reasons why to wait – “customers are not asking, we’re not ready, our shareholders won’t tolerate it” – and it’s true that revenue drops and margins take a hit for 8-12 quarters. It takes courage to lead your employees and shareholders through the transition and to stay the course as your stock suffers – but in the end you have much more resilient revenue and higher multiples.

When an industry is going through a major transition does the CEO face it with courage and double down to get ahead of the change or stick her head in the sand? The automotive industry is facing its biggest challenge ever with the rapid adoption of electric vehicles, ride-sharing and with Level 4 autonomous driving only a few years away. Ten years from now we’ll look back and see which CEOs had the vision and courage to lead their auto companies into the new world and which didn’t, because some car companies will no longer exist. But in the short term pouring investment into new technologies to get and stay ahead of the rapid rate of change is a huge decision. At Faurecia (a $20B auto company where I am on the board) the employees are not confused. The CEO is direct with them about the need for tremendous change and he is showing significant courage investing and leading them through it.

Firing non-performing executives is another area that takes courage. When an executive is weak the employees know it. But so often CEOs are slow to act. There is an old adage that by the time you know you should fire someone you are probably already 6 months too late. So why then will a CEO know he has an executive that is not cutting it and yet wait? Because firing people is hard and carries the risk that you will not hire well – maybe you’ll make a mistake and hire someone who is no better? Or maybe you are just so busy you can’t face putting the time in to do the search for a replacement? Firing a B-player senior executive is risky but so necessary because their department/group/division will be populated with B players, not A players and so probably not as competitive or effective as they need to be.

And finally a more subtle one. The courageous CEO is accessible. He will answer emails directly from employees rather than hiding behind an admin. He’ll walk the halls and factory floor to really listen to what employees think. He won’t stay behind glass in mahogany row and limousines, he’ll make sure his customers and his managers can find him, talk to him, and most importantly bring him bad news without him shooting the messenger. It’s a subtle form of courage to truly listen, but it’s courage none the less.

Can you put yourself in your CEOs shoes? Do you see courage and the willingness to take risk to grow the company, to listen, to make the big moves? Take a good look and then make your own assessment of whether your CEO is going to win. And whether you want to be one yourself one day.

Career Advice

Why being kind as a leader trumps yelling every time

February 10, 2018

Are you conscious of how you react as a leader when someone makes you angry? With an attack or with kindness?

I once worked with a head of sales who, when things were not going his way, would curse out anyone not on his team who he thought didn’t appreciate how hard his job was. Unkind, unnecessary accusations of incompetence or intentionally obstructing sales. Engineering, customer success, marketing – you name it – they all got yelled at instead of constructively engaged. But unpredictably so everyone walked on egg shells around him.

I recently saw a situation where an employee disappointed a startup CEO and the CEO chose to call her up and scream at her. Profanity laden, unfounded accusations of mal intent. The employee had resigned at an inopportune time and the CEOs reaction was to attack. Not give the employee the benefit of the doubt, or quietly share her disappointment.

And sometimes it even happens with customers. But in all cases shouting and bullying is not only poor leadership – it is harassment.

It’s so easy to react emotionally and react with anger. To raise your voice and attack. To clench your fists and shake with emotion. It is so much harder to react with kindness and yet being kind is often one of the characteristics of great executives. Not soft or weak; kind.

This is because it takes extra energy and thought to manage your reaction. It takes caring about the people you are leading or working with more than yourself. You have to step back and make the mental space to think through what’s behind the employee’s action. Have they made a mistake because they did not have enough information? Or because they didn’t think their action through? And if so how should you react to help them make a different decision next time?

I had the pleasure of working for a COO once who was a master at this. He never got angry, never raised his voice. He had a staff who were strong willed and opinionated – we must have been a nightmare to manage. Several of us went on to bigger jobs as CEOs, professors, GMs but at the time we were never satisfied, always pushing for more and for change. And we were definitely not always constructive. I learned, while working for Chi-Foon Chan at Synopsys, that you never need to attack to get your way. You can listen, respond with thought and patience and still exercise tremendous power. Very, very occasionally the chief would get angry but he would go quiet and still and wait us out and then quietly corner us with intellect. Impressive and something I aspired to once I was a CEO (although not always successfully).

The net result of having the self-control to think of your employee first and be kind is that people will remember you positively, will want to work for you, and will recommend other people work for you. You will make their lives better and they will be in the foxhole with you as you grow your company. And if their own careers are growing and they want to move onto a bigger job they will talk with you about it so a) you will not be surprised and b) you can help them find their next position – thereby earning their lifelong loyalty. I worked with a first-class CFO once who had three department heads: Accounting, FP&A and Treasury and he was clear that part of his job was to groom each one of these heads to be a CFO, knowing that when they were ready they would leave him. He succeeded and inspired deep loyalty in everyone who worked for him.

So if you find yourself reacting with anger and raising your voice, or worse yet yelling at an employee, step back and count to ten. Breathe deep and find another way. It’s simply not worth the destruction of relationship that occurs when you lose your temper.

Career Advice

When to apologize and when not to

November 21, 2017 Leave a comment

I recently got a question in email from a woman (who is early in her career) which I answered, but then as a few weeks passed, I began to think about all the times I wish my coworkers had apologized and when they did it too much.

The question was:

“Should I apologize when I make a mistake at work, and if so, how? If not, what should I do instead? I notice I am apologizing for mistakes that are mostly my responsibility, but not only, and that nobody else is apologizing.”

The hard thing about apology is some people do it, and some don’t. Some are comfortable making mistakes and being imperfect, others are not. But done thoughtfully apology is a powerful way to build trust.

So first – why not to apologize unless absolutely necessary

– Some men (and some women, although fewer) see it as a sign of weakness and will use it against you, bringing up your ownership of a mistake to weaken you in the future. Be conscious of when, where and to whom you apologize.

– If you are trying to manipulate or being insincere to achieve some other end then you will erode trust because most people can tell when you are insincere.

– If you are not the one who made the mistake. Again, not dealing in the truth erodes trust, even if you are trying to show you will own problems. Don’t throw someone else under the bus, but don’t step in and apologize if it is not your mistake because it may also be used to undermine you in the future as someone who can themselves be thrown under the bus.

The bottom line is mistakes are a normal part of learning. If you make a mistake admit it, see if you need to fix it, and move on. Don’t apologize unless someone else is hurt by your mistake. Don’t apologize unnecessarily, or profusely.

But then again, why apology is powerful

– Owning your mistakes openly builds trust, so if you have hurt or inconvenienced someone then take the time to apologize and try to do it one-on-one so you can be sincere and open.

– It takes courage to apologize which is why so many people don’t. You make yourself vulnerable when you do, but being strong enough to admit your imperfections (within reason) will make you a more compelling leader. Being authentic is a very powerful way to lead.

– The people who can’t admit their mistakes have a huge issue building trust as leaders. Too many times I have heard the comment “well s/he can’t admit when s/he’s wrong so s/he’ll make it someone else’s problem.”

These examples are all internal, but the one area where you need to be courageous and ready to take ownership is with customers. Your customers often need to hear from someone senior that you recognize a mistake has been made and you are going to fix it or make sure it gets fixed. If you are the senior person in the room and your company has made an error or let a customer down then own it, whether or not you are directly responsible.

In the end it is important to be thoughtful about how and when you apologize so your apology is both authentic and appropriate for your level of ownership of the issue. And make sure you do apologize when you own a problem and you don’t become one of those people who can never admit their mistakes.

Leadership

The importance of being humble

July 16, 2017 1 Comment

Photo: At the Jordan river where Christ was baptized and Israeli and Jordanian soldiers watch each other, guns cocked

We’ve all met this person in our professional lives. Smart but self-absorbed, in love with their own success so far, or with the self-importance of their title, or the size of their business, or how attractive they are. Executives who are so used to everyone catering to their every need that they forget to be courteous. VCs who are so used to entrepreneurs beating down their doors they forget to be kind (or worse). Entrepreneurs with hubris who think because they have raised money they are already a success. Lawyers and bankers who have been making so much money for so long they think their time is more important than the people around them.The behavior is irritating, but why does it matter? It’s not my place to moralize in the greater sense but in my experience the behavior does catch up with most people in their careers, one way or another, in the end.

Unless you have fast runaway success, or true genius (very rare), or are the Zaphod Beeblebrox, you are going to need the people around you for you to succeed long term. If you are arrogant it is hard to get your peers to want to work with you, or for you. Weaker people will, but the strong ones will move on. And, in the end, you are only as good as your team. People might stay with you while the money is good – attaching themselves to your coat tails – but when your company/responsibility hits a bump in the road, or they don’t need you, they will leave you.

Being self-absorbed might not hurt you at work because you’re the man with the big, hard-driving job… but chances are you are hurting the people who love you with your self-absorption. Yes, I am speaking from personal experience here both as the one doing the hurting and the one being hurt, and now observing professional friends who, in their self-absorption, forget who they are hurting.

As a good friend (and mega-company CEO) once told me: for the smart, strong, over-achievers it helps to think about life as a three-legged stool and all three legs need to be stable for your life to be balanced.

The first leg is work. How you get intellectual satisfaction and earn a living.

The second leg is fun. Family, friends, good times. How you find pleasure and love.

The third leg is spirituality, whatever that means to you. How you remind yourself that this is a huge, mysterious world and you are (no matter how important you think you are) just a small part of the grand scheme of things.

When the world is beating a path to your door, the money is rolling in to you or your company and the people who want things from you reinforce how terrific you are… how do you keep the third leg planted firmly on the ground?

A shock might do it for you for a while. A project fails, you lose a customer, you have a health scare, maybe you lose your job, but if you’ve done well in the past chances are you will do well again, so how do you keep the humbling realization that you are not the center of the universe with you?

Me, I find it in many ways. Through understanding history where the complex, messy story of our world and our humanity puts my insignificance squarely in perspective. Or through nature by hiking into the beauty of the mountains or the desert where I am reminded just how small I am. For some it is their God and faith. For some it is volunteering to help other people in need. What is it for you?

In my experience of powerful business leaders the truly great ones stay humble. Yes, they have strong opinions and expect to be listened to, but they also never forget who they are. The great ones treat admins, junior staff and vendors with respect, they put time into their family, they vacation with their friends, they are far from the entitled, the-one-with-the-most-toys-wins culture. They are the ones that people follow from company to company and remember with a smile for the rest of their lives.

How do you or I become one of them? I think that along with all the professional skills and opportunities in the world it is critical to remember who you are, truly, in the grand scheme of things and stay humble.

Written for a dear friend who tells me he is working on it.

Leadership

Startups and adrenaline are a potent mix

April 26, 2017 Leave a comment

Fred Wilson’s post a few days ago “Starting is Easy, Finishing is Hard” speaks to the grind going on for many tech startups today. He says the easy exit days feel as if they have gone and for many it is taking raw tenacity to finish.

And he’s right. When you are the CEO or in the founding team of a startup the years are long. It feels as if it will take forever to get to the next stage of product, or growth, or market development.

But the days are short, and it’s what makes the days short that draws in many founders. It’s the adrenaline. Yes they should have a vision, and passion to change the world (a passion to get rich typically backfires) but without a love of the adrenaline rush they would not last a year.

You feel the adrenaline every single day. When you close a deal, when you talk with your team about your dreams, when you pitch a VC (whether or not they bite), when you have a vision match with a huge customer, when you can feel the forward progress. Your heart beats faster, your hands may shake. It’s hard to come down (many startup CEOs I have known, me included, self medicate with a stiff drink at the end of the day), it’s hard to sleep, but it makes 5am exciting because you know the rush is going to start again the next day.

In many ways you need the drug (it’s a hormone) in your body. It makes your mind sharp, it increases your intensity, it helps you focus on exactly what you need to do second to second to win in each situation. And succeeding is all about having the tenacity to win against a million people/circumstances/barriers that want to stop you every day.

Getting a new company up and running and successful is SO hard that I don’t advise people to do it unless they simply cannot stand not to, and only then if they have the stomach for the stress and can manage themselves through it. I am working with a brilliant founder today who is swinging from the heights of heaven to the depths of hell as her company leaps forward and who has designed a swimming and yoga weekly schedule simply to help her manage the stress.

And what’s interesting about the adrenaline phenomenon is one day it all stops. I ran into a girlfriend at the airport this week who ran a hugely successful company, and is now retired, and as we compared notes she told me she just stopped enjoying the rush, and then she knew it was time. When you dread the 5am calls, and you dread taking another redeye, and while you can still get the rush in front of a customer, but not every day, then it’s time to hand the baton to the next woman who wants to change the world.

Boards, Leadership

Why you need a CEO on your board when you are the CEO

July 20, 2016 Leave a comment

One of the first decisions an entrepreneur needs to make once she has raised money for her great new idea is to build a board.

This is a conscious act. Yes, your investors probably have board seats, at least the lead investor will. If your investors are angels maybe 2 or 3 of them have demanded to be on your board. But beyond this crew you owe it to yourself to step back and think about who do you want on your board to help you build your company.

It is entirely reasonable for you to put one outside director on your board, and it’s an unusual set of investors that will not allow you to bring one new director on. And when you do, you want to bring on a current/former CEO.

Why a CEO? Why not a technologist, or a family friend, or your cofounder? Fundamentally, a current/former CEO is going to have seen your movie before and will bring a wealth of unexpected advantages to your board and your company.

Independence
Your board has a duty to represent all your shareholders, but more than that they have a responsibility to care for the company first. For your employees, your reputation, your probability of success. Having a board member who is truly independent of the investors can help bring a broader perspective to the board discussions. I have seen investors who are so focused on their own issues they lose sight of what’s best for the company. An independent director can take her role – as the one person who is not worried about the timing and size of liquidity but is instead worried about the long term success of the company – very seriously.

I met with a big time PE partner (let’s call him Adam – not his name) recently, who is sitting on a private technology board. As we talked he told me the CEO was dealing with the issue that he, and the other big time PE firm on the board have different agendas. One is a long term investor, one is interested in liquidity sooner, and the difference is a strategy problem for the CEO. The investors are balanced in ownership and the CEO is caught in the middle. I asked Adam “Why is this the CEO’s problem? Surely the CEO’s responsibility is to grow a great company and create the greatest value he can, not worry about negotiating between the two of you on the timing of an exit. It’s a ridiculous waste of his time”. Adam (figuratively) took a step back and agreed. I’m not on this board, but I can still make the case for the CEO not being distracted!

Resources
You’re going to need advice as you build your company, great advice. Yes your investors may know a few people, but you want to be referred to people who are not looking to your investors for future referrals, again who are truly independent. You’ll need lawyers (you want a pit bull in your corner unless you have truly world-class VCs), recruiters, marketing consultants etc. etc. And when you hire them you want to know they are loyal to you, not back channeling to your investors. An independent CEO should have a quality network for you to tap into.

Working for you
There will be times when you need to get something done but you are out of time and need some sleep. You can use your CEO/director to give you capacity. Maybe you need her to build a model for you, maybe you don’t know how to present an issue to your board and your director can build a sample presentation for you to help you frame the issue. At a minimum your director can do deep reviews for you of your own presentations, legal agreements, offer letters, compensation plans… with the eye of someone who has done it before.

Role experience
A high quality former CEO will bring experience of what the job really entails. What are you truly responsible for vs what decisions your board can make (which is very few in reality)? What does it take to build a world class team? What does it take to close your first few big deals? How to focus. Only someone who has done the job for many years really knows what it takes, and there are many investors out there who like to give you advice, but have never been in the role. Your director can be a sounding board for you in the role of CEO.

Being the bad guy
Your CEO director is not your friend, and sometimes she may feel like your enemy, but because her only reason to be there is to help the company, you can trust her even when you hate her. I’ve always had a former CEO on my boards, and sometimes it’s been absolutely maddening.

For example, the time my director attacked me in a board meeting and took me to pieces for a plan I proposed. Afterwards I asked him what the hell was he thinking coming after me in a board meeting? He humbled me by telling me he could see my main investor was winding up to attack and so he decided to attack me first so I did not get into a fight with my investor. He knew me well enough to know that if attacked I would attack back, and hard, and that could damage my relationship with my investor.

And for example, the time my director had a one-on-one with me and decimated my forecast. Destroyed my faith in every deal. Ripped every one of my sales campaigns to shreds. His motivation? To wring every piece of optimism out of my forecast so I knew the worst case and could then focus on what needed to be done to bring the probability up on each campaign.

Daily coaching
There are times when things go well, and then there are times which are rough. Raising money can be one of those times. Having someone you can call every day to review how things are going is so very helpful, and you cannot be calling your investors. You need a safe place to call. Someone who has no other agenda but to help you and the company succeed. And someone who has been there. That is a current/former CEO.

You may be thinking “well that’s self-serving of her given she’s a former CEO who sits on boards”. Yes, probably right, but right now I am meeting with many, many interesting entrepreneurs and I am hearing too many worrying stories of entrepreneurs who need better board advice and support.

Leadership, My Personal Journey

SPLX IPO 15 Years Later

May 3, 2016 1 Comment

15 years is a milestone I think. Short enough that I still remember, long enough that is seems far in the past.We took Simplex public 15 years ago today. May 3, 2001. It was the culmination of a wild ride, and the beginning of another. Going public is a rite of passage. It’s not a birth (founding a company), it’s not a marriage (M&A), it’s not a death (shutting down) so maybe it’s like a bar mitzvah or confirmation – a rite of passage into adulthood. You take a company public when you are large enough that you want to fund the company into the next phase of growth on the public markets, and you want to provide liquidity to your investors. In 2001 that meant revenue of about $50M was needed, profitability, and steady, predictable growth which we had. We loved our company, and we were proud of our technology and our customer relationships.

With the Simplex IPO we threaded the needle between two significant market crises. In April 2000 the dot com bubble burst. We were not a dot com, we were a real company in the semiconductor space selling very nerdy software to chip designers. We filed our first S1 on September 11, 2000. Yes, 9/11 but a year earlier. (Actually we sent the docs to the SEC on Friday Sept 8 but we missed the cutoff so the filing date was 9/11).

Even by Sept 2000 there was little appetite on Wall St for a tech IPO because everyone had been burned by tech valuations based on a faddish bubble. But by late March 2001 we still needed cash to keep growing (we were opening international offices and hiring people behind our growth). I met with Larry Sonsini and Frank Quattrone (both kings of the Valley at the time) and we all believed we could price the deal. So we went on the road.

One of the most intense experiences of my life. 3 weeks of meetings 7-8 meetings every day. Paris, The Hague, London, New York, San Francisco, New York, Chicago, Minneapolis, Dallas and finally Houston. I drank too much vodka and took smoking back up for the 3 weeks (I did quit again at the end thank goodness). I lost 12 lbs in 15 days because I was not eating much. It seemed as if I was always presenting over breakfast and lunch so when was I going to eat?

And then, on May 2, in the late afternoon in Houston, we priced the deal, sold 4 million shares to CSFB, brought in $44M in proceeds for Simplex and hopped on the private jet to New York to be there for the market opening the next day. I slept on the plane, but not much when I got to New York.

May 3 was a round of interviews. Radio, Bloomberg TV, CNN’s finance network at Nasdaq, and time on the floor with the CSFB trader who was making the initial market in SPLX stock. We opened at $12 and closed over $21. The book was 11X over subscribed and we were one of the very first tech deals to get done successfully in 2001, opening up the market for many more that had been waiting. Maybe we priced too low, maybe not, there was no way to know because the market was so skittish.

But, of course, we were only public for 4 months before September 11, 2001 hit. The market collapsed, our customers delayed orders and our stock dropped to $8. A violent roller coaster is too gentle a term for what this felt like. The gripping stress of how to make sure the company, our employees and our customers were OK. When Cadence approached us to buy us in January 2002, a deal we eventually closed on June 2, 2002 for $300M, it was the right outcome for the company. As one of my board members told me “there’s a war coming, you are too small to survive it”.